Nokia roils Europe techs, RIMM holds

McDonald's higher on August sales, MOT higher

By

EmilyChurch

LONDON (CBS.MW) - Nokia dropped as much as 6.3 percent in pre-open trade on Tuesday after its downbeat third quarter sales outlook sapped some tech market bulls. Motorola, the No.2 handsets, rose amid a broker upgrade.

Nokia
NOK, +0.19%
the leading European tech-telecoms bellwether, confirmed the view that handset sales are strong in the current quarter, but the Finnish company stuck to targets for flat-to-down sales over the year ago as the weak dollar takes its toll.

Nokia said it expects earnings per share in the third quarter "to be at the high end or slightly above" the outlook it set in July for earnings per share of 15 to 17 euro cents. See full story on Nokia's mid-quarter update

Chief Financial Officer Olli-Pekka Kallasvuo told a conference call that average selling prices on Nokia mobile phones are down in the third quarter on the year and against the second quarter. Nokia shares added to losses during the call.

Motorola
MSI, -0.29%
were up as much as 2 percent to $11.50. UBS raised its rating on the stock to buy, telling clients that checks with component suppliers, distributors, and operators "indicate Motorola is on-track to ramp new handset products in the coming months."

Networkers up

Telecom infrastructure stocks were mainly higher. Nokia, which has its own mobile networks division, said the market has bottomed but that a recovery has yet to form. A handfuk of broker upgrades also bolstered the networking stocks.

Shares of JDS Uniphase
JDSU
swelled 5.7 percent to $4.24. Cisco Systems
CSCO, +0.57%
saw its shares rise to $21.35 from a close of $20.86 following a Deutsche Bank upgrade to a "buy" rating from a "hold." Deutsche Bank also took its fiscal 2004 and 2005 earnings estimates slightly higher and hoisted its price target on Cisco to $25 from $17, citing improving business trends across the board.

The Nokia sales caution impacted European tech stocks, but a handful of chip-related European stocks as well as some U.S. stocks were holding overnight gains, dealers in London said.

Chief among them: Research in Motion
RIMM
The stock crossed at $35.05, holding a 24 percent surge from late Monday. The maker of the popular BlackBerry handheld said that it expects to do better than breaking even in the quarter as revenue handily exceeds objectives. See full story

UBS and J.P. Morgan Securities upgraded the stock overnight. "We are surprised by the increase in demand this quarter as we did not expect to see new products accelerate until next quarter, given the generally slower summer months," UBS said. It raised its rating on the stock to buy and its price target to $40 from $25.

J.P. Morgan lifted its rating to neutral from underweight, telling clients, "in our view, the biggest issue remains the NTP patent dispute, and the modest risk that an injunction will be imposed if appeal is unsuccessful... Until resolved we remain cautious on RIMM, particularly in view of the stock's rich valuation."

McDonald's
MCD, +1.56%
was marked around $24.75 in London, up over 5 percent. The fast-food giant late Monday said same-store sales in August climbed 3.8 percent system-wide and 8.8 percent in the U.S. Total sales jumped 10 percent to $4.19 billion. See full story.

Elswhere, Dow component Home Depot
HD, -0.54%
was downgraded by Goldman Sachs to an "in-line" rating from an "outperform." The brokerage also lowered its view on the hardline retailers to "cautious" from "neutral," citing higher mortgage rates as the prime reason.

European auto stocks were edging lower as the Frankfurt Motor Show opened. The event is the biggest of the year in Europe for the carmakers and is likely to set the tone for sales expectations as a bevy of industry chiefs update the market.

DaimlerChrysler
DCX
(710000) was last down 1.5 percent. The head of the luxury Mercedes unit predicted flat sales for 2004 and better sales in 2005. See more

Drugmaker GlaxoSmithKline
GSK, +0.08%
was 1.8 percent lower in London as it said a generic version of anti-depression drug paroxetine hydrochloride, known by the Paxil name, was launched on Monday by Apotex Corp., which triggers a licensing deal for Glaxo to manufacture a generic immediate-release tablet that Par Pharmaceutical will sell.

European markets slightly retraced losses on Tuesday after Eurostat reported its first estimate that second-quarter GDP declined 0.1 percent in the eurozone, or a 0.2 percent rise year-on-year, in line with consensus expectations. Japanese stocks gained overnight.

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